Mon June 23, 2014

Texas Oil Industry Keeps Wary Eye On ISIS

While the crisis in Iraq is half a world away, it’s impact can be felt here in the U.S. The rapidly destabilizing region is a base for major Texas oil companies, some of whom have had to evacuate the increasingly hostile environment.

The Islamic State of Iraq al-Sham, better known as ISIS has launched a string of attacks in northern Iraq, including an attack on an oil refinery. The Texas Standard’s David Brown speaks with Don Stowers, Chief Editor of Oil & Gas Financial Journal in Houston about the situation and it’s impact on the U.S. fuel industry.

“[Oil companies are] already taking some preemptive measures.” Stowers says. "I'm not sure the intelligence is satisfactory, so everyone - just like you would in a hurricane approaching the Gulf Coast - you would start evacuating before you found out it was necessarily a category 5 storm."

Exxon Mobil has carried out a major evacuation. BP has evacuated 20% of it's staff. Schlumberger and Baker Hughes are reportedly taking a wait-and-see approach. Stowers says most of Iraq’s oil producing industry is located in the south of the country. U.S. operations there are mainly refineries, and may be better protected.

“It looks like the militias there are arming themselves and working with the government forces to try and repel ISIS from that area,” he says.

“The Iraqi government so far hasn’t put up much resistance," Stowers continues. "But ... it's been out of its comfort zone in the north, I think. As the ISIS militia moves south to the predominately Shiite areas, it looks to me that the Shiite militias will sort of bolster the army."

If ISIS were to reach the southern oil fields and refineries, Sowers says, the refineries "wouldn't be operating at full capacity if you evacuated a lot of the western workers, who are mostly there in a supervisory capacity. Oil exports would be reduced dramatically."

Iraq is the 12th largest oil producer in the world right now. A large portion of its oil is exported through Basra in the country's south. Europe would be the most affected by that, says Stowers.

“At this time," Stowers says, "it's only a category 1 or maybe a category two [hurricane]. Things haven’t been really affected yet but the potential is there for it to build into a stronger storm.”